Just because you refuse to check the weather report doesn’t mean you’ll stay dry in a rainstorm.
I don’t know if this is a saying, or if I made it up, but I feel like it’s true.
How much is in your bank account right now? How much have you charged to your credit card? Are you thinking about planning for retirement?
If you’re living your life day to day without knowing the state of your fiances, you’re in denial. And denial is a dangerous enemy. Pretending you don’t have problems doesn’t eliminate the problem, after all–it usually just makes it worse. So if you get a bill in the mail and it goes unopened because you don’t want to deal with it… If you don’t know how to make your student loan payments or who to call if there are problems–DENIAL. no budget? Denial. Do you make impulse buys because you don’t see why it would hurt? Denial. Don’t know your credit score? Denial
Time to grow up, I’m afraid. No one is in charge of your financial success or demise except you. And you need to be vigilant if you want to be successful. Look at the various components of your financial life– checking, savings, credit, loans, debt. You ought to be able to know your approximate net worth at any given time.
Because the world runs on money. You need to know how much you have and how much you owe so that you can survive–and possibly succeed– in this world.
Think I’m exaggerating? Let me say some things to you:
Grad school. Travel. Eating. Moving cities. New job. Wearing clothes. Rent. Starting a business. Mortgage. Furnishings. Toys. Car. Sickness. Accessories. Vacations. Marriage. Children. College. Retirement.
Feel like being able to pay for any of those things?
I’m sorry to say it, but if you’re reading this blog, you’re probably in a first world country and thus your society operates on a system of earning and spending money, at least secondarily to, you know, love and happiness and stuff like that.
Let me say some more things to you:
You can afford all of those things and more as long as you are not drowning in denial. If you know what the heck is going on with your purse or wallet, you’ll be able to do things like: plan and execute that plan. And while I wish my plan would take effect immediately, it doesn’t. It will take time to get out of debt, to pay off student loans, to pay off my loan for a mode of transportation, to save for my wedding, to start a trust fund for my kids, to have a retirement nest egg… but the point is: I’m taking steps to do all those things. A lot of people who declare bankruptcy or are homeless say that a bunch of stuff just piled up on them and they just ignored it… then those problems consumed them and ruined their lives. The first step to avoiding being in a bad situation, or getting yourself out of it, is overcoming denial.
The awesome thing about being young without money is—we’ve got time on our side. Sadly, there are countless individuals who are 65+ that are in much a similar situation as we are… except worse. Because now they’re older–they have just as much, if not more than we do, to pay for but they can’t work as much and they don’t have much time.
The first step is admitting you have a problem. Wake up and smell the coffee. All those other cliches about how you need to not be in denial anymore. They’re all true.
Take your future into your hands today.
1. Write down– paper and pen, or use whatever system you have for remembering things (I use Evernote) how much money you have right now in every single account. All your cash, checking accounts, any investments your parents (or you!) may have, savings, trusts (lucky you), etc.
2. Write down how much money you owe… anyone. Student loans. Car loan. Credit cards. Friends. Family. Library. Whatever.
3. Find out your credit score. You’re allowed one free credit report from the three bureaus a year; you can go to Annual Credit Report, which is run by the government office that overseen by the three credit reporting agencies. Or you can use CreditKarma.com to get an estimated score, but you don’t have to pay to use the site (you should do this in addition to your real annual one, just to keep track of how you’re doing). Or you could do FreeCreditReport.com (but you have to pay the subscription fee after the trial period). The latter two sites have helpful tools to help you track your score and more. You need to make sure there aren’t any costly mistakes on your reports… identity theft is real and happens most to people our age.
4. Sign up for notifications. Your bank most likely has options to send you notifications about your checking account balance daily. Check to see if your credit card has this, too. You need to get a text or email every day– either in the morning or night– about the state of your accounts. It just may keep you from overspending. This is an exercise in beating denial. You also need to have a good system to remind you when your bills are due. Having a calendar–I use Google Calendar– to put down when each bill is due and have notifications sent to you a day before is really helpful and can keep you from paying late fees and maintaining a good payment history. Every single bill you pay needs to be on your calendar.
5. Open your mail. Email or hard mail is easy to delete or throw away, but it could hold important info for you. Your student loan owner will probably mail you when your interest rate changes– you need to know what the new rate is! Open and read all financially-related email or mail the day you get it. Except stupid, unsolicited credit card offers. Throw those away immediately. Those suck.
If you do these things, you’re no longer in denial about your finances. You will have taken the fist step to owning the responsibility of your finances. And that is awesome! Knowledge is power, right? Now that you are no longer in denial, you can look at these areas of your life and create your plan. That means looking at what you spend, finding out where you’re indulging yourself, make a budget, stick to it, make a plan for saving, investing, buying and retiring… and living your life the way you want.
Money is a tool– you can use it or it can be used against you. Let’s build.